Landlord tax for non-UK residents

If you own rental property in the UK but are based overseas managing a tax return to HMRC can be tough. As property tax specialists based in Britain, we can help.

Simon Thandi, UK Landlord Tax

Hi, I’m Simon.

I’m one of the Directors of UK Landlord Tax and as it happens, a landlord myself. I still remember the thrill of acquiring my first rental property. Back then, I had a lot of questions, and there were times when it felt like more of a challenge than an opportunity. But mighty oaks from little acorns grow, as they say. If you’re just starting out on the landlord journey, get in touch and let my team give you a helping hand.

Becoming a landlord should be exciting, not an ordeal

We make property tax easy by…

Doing your tax return

We’ll just do it. You hand us the paperwork, answer a few simple questions and we’ll fight through all the bureaucracy on your behalf.

Getting it right

Because we complete tax returns for hundreds of landlords every year, we know every wrinkle and trap in the process. It’s second nature. That means you can relax knowing it’ll all be done properly, on time, and hassle free. If HMRC does have questions about your return – you know what the taxman is like – we’ll handle those for you too.

Reducing your tax bill

We’ll always look at each client’s unique situation and treat the property they own as just one part of their financial affairs. If there are allowances or tax breaks to which you’re entitled, we’ll spot them and make sure they’re claimed on your return. We can also discuss the way you own or manage your property which could save you money.

Non-resident tax matters

We can help you with tax residency, domicile and any other non residence tax matters. Please get in touch.

Download our FREE UK Property Tax Guide.

A simple guide to property rental income tax and property capital gains tax for UK Landlords.

Current tax rules

Dealing with HMRC

How our tax system works outside of PAYE

Frequently asked questions

Do I need to file a tax return?

If you live outside of the UK and receive rental income then you will be required to file a tax return. If the property is jointly owned then each owner will need to file a tax return.

This is the case even if there is no tax to pay.

If you have not yet registered with HMRC for self-assessment you can do so by completing form NRL1i. This will not only register you but HMRC will also notify your letting agent, if you have one, or your tenant, that you are registered with them.

Otherwise if the letting agent/tenant is applying the rules correctly, they will deduct 20% of the rent paid and send this directly to HMRC. You will then need to file a tax return to get this deduction back.

Registering under the Non-residents Landlord scheme does not exempt you from Income Tax it merely means that the letting agent/tenant does not have to deduct tax.

Can I claim for the cost of travel to the UK?

Travel to the UK from abroad is an allowable cost so long as the travel was “wholly and exclusively” for the purpose of the letting business.

The main exception to this is if you have appointed a letting agent to manage the property for you. HMRC maintain that if you have a letting agent that manages the property, it is the letting agents place of business from where the property is managed. As such only the travel from the letting agent’s offices to the rental property is allowable.

If you manage the property yourself you may be able to claim the cost of travelling to the UK to deal with managing or dealing with other aspects of letting the property. If there is any private element to your visit and there is a “duality of purpose” the cost will not be allowed for tax purposes.

Example 1

You come to the UK for 2 weeks. You handle a changeover of tenants but you also visit friends and family and go to a few tourist locations. In this case the whole of the travel cost would be disallowed under duality of purpose rules.

Example 2

You come to the UK for 2 days. During that time you handle the changeover of new tenants and deal solely with other letting related matters. You stay in a hotel and go out for a meal as part of your stay. You then return to your country of residence. In this case provided you have kept receipts and evidence of your stay (airline tickets, etc) you can claim for the travel, accommodation and meals would be allowable.

Do I have to pay tax on my UK rental income?

Rental income arising in the UK is subject to UK tax. Depending on your nationality and where you live you may be able to claim the UK personal tax allowance to set off against your rental income. You may also have to pay tax on your UK rental income in your country of residence. We therefore advise that you check this with a suitable qualified adviser in your country of residence.

So that you do not get taxed twice on the same income, the UK has double tax treaties with many countries to allow for tax relief from double taxation.

What is the Non Resident Landlord Scheme?

The Non-Resident Landlord Scheme is a scheme for taxing the UK rental income of persons whose “usual place of abode” is outside of the UK.

As a non-resident landlord you are required to register with HMRC under the Non Resident Landlord Scheme. This can now be done online by completing form NRL1i. HMRC will then process your registration and issue your self-assessment unique tax reference (UTR) to enable you to file tax returns. HMRC will also notify your letting agent, if you have one or your tenant that you are registered.

If you are not registered, your letting agent or tenant is required to deduct 20% of the rent received and pay this over to HMRC. The deduction can then only be refunded once you file your tax return. Registering under the Non-residents Landlord scheme does not exempt you from Income Tax it merely means that the letting agent/tenant does not have to deduct tax.

Do I pay inheritance tax charged on my estate if I am non-resident?

As a non-resident you are subject to UK IHT on your whole estate if you are UK domiciled and your estate is valued at over £325,000.

If you have a non-domicile status in the UK, only your UK based assets will be liable to inheritance tax in the UK.

Can I hold property in a non-resident limited company?

Yes. For the 2020/21 tax year and onwards, Non-resident landlord companies must report their UK income by way of a CT600 return under the corporation tax system. 

Please see our detailed guide.

What is the difference between residency and domicile?

Residency is the place where you are living on a day to day basis and is considered each year. For UK Tax purposes, your residency is determined by the Statutory Residence Test.

Domicile is an intention to live in a place indefinitely rather than living in a country for a temporary purpose.

For more detailed guidance please see the following guide.

Do I get a tax free allowance against my rental income?

The UK personal tax allowance is currently £12,500. (2020-21)

If you are a British national it does not matter where you live as you are automatically entitled to this tax allowance against any UK income.

If you are a national of a country in the European Economic Area (EEA) you may be able to get the same tax allowances and reliefs as a UK resident. The EEA is:

Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein. Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, UK.

In addition to the above you would also be entitled to the personal allowance if you are:

  • A national of Israel or Jamaica.

Or

  • If you are a national AND also a resident of:

Argentina, Australia, Azebaijan, Bangladesh, Belarus, Bolivia, Bosnia and Herzegovina*, Botswana, Canada, Cote d’Ivoire, Croatia*, Egypt, Gambia, India, Indonesia, Japan, Jordan, Kazakhstan, Korea, Lesotho, Malaysia, Malta, Montenegro*, Morocco, New Zealand, Nigeria, Oman, Pakistan, Papua New Guinea, Philippines, Romania, Russian Federation, Serbia,*, South Africa, Sri Lanka, Sudan, Switzerland, Taiwan, Tajikistan, Thailand, Trinidad & Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, Uzbekistan, Venezuela, Vietnam.

(*Entitlement continues under the Double taxation Treaty the UK had with the former Yuogoslavia until such time as a new agreement takes effect.)

Do I have to pay capital gains tax when I sell my UK property?

Non-residents did not pay any Capital Gains Tax before 5th April 2015.

All non-residents are required to pay Capital Gains Tax on any chargeable gains on residential property from 6th April 2015 and on commercial property from 6th April 2019.

If the relevant property was owned on 5th April 2015 (for residential property) or 5th April 2019 (for commercial property) then the market value at the relevant date can be substituted for original cost.

For example,

Shane purchased an investment flat in Kensington in 2000 for £500k. Shane left the UK on 5th April 2015 and at that time the flat was valued at £1.5m. Shane now decides to sell the flat and is given a current value of £2m. Ordinarily, Shane would have a gain of £1.5m (£2m less £500k.) He could now opt to have the value as at 5th April 2015 as his base cost. His gain would therefore be £2m less £1.5m. The gain is reduced by £1m.

The gain must be reported online to HMRC within 30 days of the completion of sale. Any capital gains tax must also be paid within 30 days.

Do I have to pay the higher rate of SDLT on a property purchase if I live outside of the UK?

If you own another property, whether it is in the UK or not, you will be liable to pay the 3% higher rate SDLT when purchasing a property in the UK.

What do I need to file if I am selling a UK property?

As of 6th April 2020 you are now required to file an online disclosure and pay any CGT within 30 days.

Please see the following detailed guide to the filing requirements.

How many days can I spend in the UK and still be non-resident

It is no longer a simple matter of limiting your time in the UK to a number of days. This can be a complicated matter and we advise that you seek professional advice. Please also see our guide to the Statutory Residency Test.

What is split year treatment?

When you move in or out of the UK, the tax year is usually split into 2 – a non-resident part and a resident part. This means you only pay UK tax on foreign income based on the time you were living here. This is called ‘split-year treatment’.

For more detailed guidance on this please see the following guide.

What is the statutory residency test?

The Statutory Residency Test (SRT) allows you to work out your residence status for a tax year. Each tax year is looked at separately, so you may be resident in the UK in one year but not the next or vice versa.

The SRT takes into account the amount of time you spend and where relevant, work in the UK along with any ties you have to the UK.

This can be complicated and you should seek professional advice if in doubt. For more detailed guidance please see the following guide.

Globe icon Fees for single owners

Single owner

One property

This is the package for you if you’re based outside the UK and are the sole owner of a single rental property in the UK.

from

£170

+VAT

Single owners

Two properties

This is the package you need if you’re based outside the UK and are the sole owner of two rental properties in the UK.

from

£190

+VAT

Single owners

Three properties

If you’re based overseas and are the sole owner of three houses or flats to let in the UK, this is the ideal tax return package.

from

£210

+VAT

Single owners

Four or more

If you are the sole owner of four, five, six  or more UK properties and let them from abroad, we’ll handle your tax return.

Contact us for a fixed fee quote

Globe icon Fees for joint owners

Joint owners

One property

This is the package for two people based outside the UK who jointly own and rent out a single property here in Britain.

from

£300

+VAT

Joint owners

Two properties

This package will suit those outside Britain who share ownership of two rental properties on the UK market.

from

£340

+VAT

Joint owners

Three properties

If you’re overseas and jointly own three properties in the UK which you’re renting out, this is the tax package you need.

from

£380

+VAT

Joint owners

Four or more

Those based overseas and sharing ownership of four and more rental properties in the UK need this fixed-fee package.

Contact us for a fixed fee quote

Let‘s talk about property tax today

When it comes to fixed-fee tax returns for UK landlords, nobody does it better.

Our single-property tax services are for you if you…

Have inherited a flat or house

This is how a lot of people first find themselves with a property other than their main residence. Selling it and taking the cash might seem tempting but there’s also a lot to be said for a long-term source of additional income, especially in these days of historic low-interest. Sell or let? Our tax return service is designed to make this decision a no-brainer.

Are moving in with a partner

When you click with somebody and decide you want to live together or get married, if you’ve both got your own places, you find yourself with a spare. This is a great way to get into the letting business. We’ll not only manage your tax return but, in this case, can also advise on joint-ownership and tax planning.

Have property as an investment

If you’ve got capital that you feel could be working harder for you, property might be the answer. Acquiring a single buy-to-let flat or house is a great way to test the water and find out if being a landlord is the game for you. We’ll make it easy, offering sound advice and giving the support you need if you decide to turn it into a property empire.

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What a refreshing experience

“We are overseas and have a property in the UK. We had a stressful time finding a suitable firm to look after our affairs... What a refreshing experience to find a company that was so helpful, so considerate, and took time to listen to our concerns. Nothing was too much trouble for them. They have just completed my tax return and although I had issues trying to find my way around portals and so on, they were magnificent in guiding me through what I considered to be a maze."

A Jones, July 2019

Via FreeIndex, edited for clarity

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